This week’s news that Softbank was making a £24bn offer for chip designer ARM prompted speculation that other UK technology companies could be in the takeover spotlight.
Sage, which specialises in accountancy software and has increasingly moved into cloud computing, has been one of them. But another boost to its share price has come from Microsoft’s fourth quarter results, released overnight, with the US group saying its cloud business had seen “significant customer momentum .”
That prompted positive comments from Panmure Gordon analyst George O’Connor on the prospects for Sage’s business, and helped send the company’s shares up 16.5p at 693p, making it the biggest riser in the FTSE 100. O’Connor said:
Ahead of Sage’s third quarter interim management statement next week we see a positive print by Microsoft and evidence of its greater progress into the cloud – this is its digital transformation, at IBM the same thing is called the “new strategic areas”, at Yahoo these are the “Maverns”, at SoftBank the “crazy things”. For Panmure Gordon they are the SMAC Stack. They all say the same thing – the importance of the new technologies (social/collaborative enterprise, Mobile, Analytics/Big data, Cloud) which are the growth seams in the software sector.
Sage and chief executive Stephen Kelly understand the importance of these new technologies. For investors the valuation impact of making the transition to the new world is huge, as is the impact of not getting it. At its third quarter we expect Sage chief financial officer Stephen Hare is likely to suggest that all is in line. If there is upside, given the fragile economic backdrop and as Sage’s entrepreneurial and SME clients will naturally be cautious, especially so in Europe – a key swing geography, we think that Sage will hold back any enthusiasm given fourth quarter uncertainties. The IMS coincides with the user-fest Sage Summit being held in Chicago. For those lucky enough to attend the event, Stephen Kelly will again champion the cause of the entrepreneur and abstract the debate from the bits and bytes of software products and take it to a more aspirational level as he champions the cause of the entrepreneur. Despite the current valuation, positive news seeping out of Chicago should ensure that the share price continues to creep upwards.
